US consumer spending rises more than expected in June

US consumer spending rose more than expected in June as households bought a range of goods and services, suggesting consumption will likely remain strong after surging in the second quarter.

The Commerce Department said on Tuesday consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.4 per cent in June after a similar gain in May.

Economists polled by Reuters had forecast consumer spending advancing 0.3 per cent. When adjusted for inflation, consumer spending increased 0.3 per cent after climbing 0.2 per cent in May. The data was included in last week’s second-quarter gross domestic product report, which showed that consumer spending rose at a 4.2 per cent annual rate, the fastest in nearly two years. That jump accounted for almost all of the economy’s 1.2 per cent growth pace during the period.

Optimism

While the second-quarter’s robust pace of consumer spending will probably not be sustained, economists are optimistic that spending will remain solid, underpinned by steadily increasing wages as the labor market tightens, as well as rising house and stock market prices.

Despite the gains in consumer spending, there was little sign of inflation. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.1 percent in June after a 0.2 per cent gain in May. In the 12 months through June the core PCE increased 1.6 per cent. It has risen by the same margin since March. The core PCE is the Federal Reserve’s preferred inflation measure and is running below the US central bank’s 2 per cent target.

(– Reuters)